Journal of Public Economics
This study examines whether higher state cigarette taxes can be used to improve birth outcomes. Data on the outcomes of interest are taken from the 1989–1992 Natality Detail files, generating a sample of roughly 10.5 million births. The results suggest that smoking participation among pregnant women declines and average birth weights rise when excise taxes are increased. These results can be used to form an instrumental variables estimate of the impact of smoking on birth weight. This estimate is remarkably close to numbers from a random assignment clinical trial. The smoking participation price elasticity is estimated to be −0.5.